Inventory Pooling Gone Wrong at Macy’s

We have given considerable coverage to the attempts made by Macy’s and Nordstrom to virtually pool their inventory. The idea is that while these firms need to carry inventory in a decentralized manner, in their brick and mortar stores as well as their main warehouses, they can still manage the inventory in a centralized manner. So, if an order is made online and the item is stocked out at the main warehouse, it can be sent to the customer from the nearby stores. The same idea applies when a customer places an order at a brick and mortar store that does not have a sufficient quantity.

During our penultimate class in the operations management course, I was discussing the benefits of such inventory pooling, and illustrating them using our recent posts. One of the students, Ryan Orr (h/t) mentioned that he recently placed an order at the Macy’s stores in Oakbrook for 10 identical ties for an important event. The store had only a limited number of ties, and agreed to order the rest of the quantity from nearby stores, and ship them directly to Ryan. As you see in the photo, Ryan got 10 ties, with 4 different patterns from 6 different stores (all in the Midwest). We blurred the receipt’s, but confirmed that all ties had the same UPC code, which means that this was not a mistake of the store in Oakbrook, the employee or the stores that the delivered the product. They all thought that they deliver the product that Ryan wanted.

Several explanations are possible:

(1) This is not a fast selling item (sorry Ryan), so over time the UPC number has transitioned from one pattern to another. Some stores carried the newer item, while other still carried the older one.

(2) It is possible that some of these stores were not originally Macy’s stores. It is possible that some of these were Marshal Field’s stores, for example, and still carried UPCs that were based on their legacy systems. We could not confirm this explanation.

(3) Loose quality control on Macy’s side. It is possible that someone accepted a shipment from a supplier to Macy’s without confirming that the shipment indeed included the right pattern. All of these are green ties, but is it possible that someone did not notice the difference in patterns. Unlikely (?)

If anyone at Macy’s is reading and has a better (and maybe the right) explanation, we will be happy to post it.

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4 Responses

1) In my FMCG experience, “retired” UPC numbers could not be “unretired” (utilized) for subsequent items. Each variety / modification to the original had its own unique UPC.

2) Specificity of item descriptions between store brands might not be sufficient to describe any differences in tie design. Differences between stripes and polka dots I get, but, perhaps a “blue / white / green silk diagonal” might be thin-striped in one brand, but medium-striped in another. Perhaps limitations in the number of character spaces on item master files forced this lack of specificity and possible mismatch when consolidating inventories?

2a) When consolidating inventories, item descriptions in master files may have assumed a level of design / pattern exactness that did not exist.

3) Manufacturer could have received incorrect instructions from Purchasing – especially if a consolidation of inventories (suggested by the author) has occurred. Each store might therefore have ties on display (of pre- and post-consolidation design) – each with different patterns but with the same UPC.

Just some initial thoughts. Meanwhile, if I am faced with a similar situation, I will use the above as a learning experience, and I will verify sameness in-person.

Inventory pooling is a great concept but must be carefully managed. It appears that the SKU and UPC are mismatched. UPC can and are often recycled but there is or should be a process in place for evaluating all current stock prior to the change and before the transition. If my green tie had small stripes and another green tie sold at the same company with stripes that are larger I would expect that each design carry a different SKU to identify the change and UPC for each